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Tuesday, February 06, 2007 | Asphalt Jungle Podcast
Voice’s three-part series on Mission Valley has struck a chord with thousands across San Diego County. Staff Writer Will Carless appeared on yesterday’s These Days radio program on KPBS-FM where he talked about the community’s history and the problems experienced by residents as a result of the lack of planning for the area. You can listen to Will’s interview with radio host Tom Fudge on the KPBS Web site.
— DENISE SCATENA
San Diego was named the best bicycling city of more than 1 million residents by Bicycling Magazine this week.
Mayor Jerry Sanders, Council President Scott Peters and Councilwoman Donna Frye will be marking the honor with a ride around Mission Bay Park on Saturday at 2 p.m.
Calls were not returned seeking the color of Peters’ handlebar tassels, but the rumor in political circles is that the mayor will affix a 1989 Garry Templeton baseball card to his bike so that it makes a clicking noise when the spokes run through it.
(Hey, we’re working on a Friday night, give us a break.)
— VOICE STAFF
Leaked to the Public
Reclaimed water that was being transferred through pipes to Poway for irrigation purposes spilled into the city’s storm drain system this week, and about 3.5 million gallons of reclaimed water may reach the Los Penasquitos Lagoon as a result, Mayor Jerry Sanders announced Friday.
The city of San Diego and several local and federal agencies are working to determine the effects of the spill, which was caused by valve breaks in Scripps Ranch, Sanders said.
Reclaimed water is often used to irrigate golf courses or parks. The city sells an average of six million gallons of reclaimed water a day, Sanders said.
— EVAN McLAUGHLIN
UC Is Tops
According to a press release issued by Marketpointe Realty Advisors in San Diego, more new attached homes were sold in the University City neighborhood than anywhere else in San Diego in the fourth quarter of 2005.
There were 161 such homes sold in University City in that quarter, Marketpointe reported. The second-most homes were sold in Chula Vista, followed by the East Village in downtown San Diego.
The average price in University City was $342,709 for a 766-square-foot condo, the release reported.
— WILL CARLESS
A Quick T.O.
Given all the chaos of the last several years, maybe it’s time City Hall took a “time out.”
That’s the recommendation Independent Budget Analyst Andrea Tevlin made to the mayor and council members Wednesday as city officials brace for what promises to be a difficult budget season.
“This ‘time out’ is needed in order to give the Mayor and City Council the opportunity to understand and review current budget policies, receive an accurate assessment of unfunded needs, identify current and future expenditure requirements, and address many of the issues that have plagued past City budgets,” writes Tevlin.
Tevlin, whose office reports directly to the City Council, suggested that the budget for the new fiscal year beginning July 1 should not provide funding for new programs, with a few exceptions. The city should only increase funding to pay for a full pension contribution; any increases to payroll that are caused by previously approved labor pacts; audit and legal expenses; and full compliance with state and federal orders to upgrade water and sewer infrastructure.
Mayor Jerry Sanders will propose a new budget to the public and council by April 15, although Sanders has stated that Tevlin will be invited to any budget workshops that occur in the meantime.
The budget for next year is expected to be chock full of payroll and service cuts as Sanders estimates that one-third of the city’s day-to-day budget, or $300 million, will be used to pay down the city’s pension debt.
— EVAN McLAUGHLIN
Bonding with the Mayor
In a telephone interview from chilly San Francisco, spokesman Fred Sainz said today that Mayor Jerry Sanders’ meetings with the three credit rating agencies “have gone really, really well.”
In the last two years, two of the credit rating firms have downgraded San Diego’s credit rating to near-junk bond status. A third, Standard & Poor’s, has suspended the city’s credit rating altogether. In the eyes of Fitch Ratings, San Diego has the credit rating normally afforded a mid-sized city with a struggling economy.
Sanders presented the credit raters with his fiscal recovery plan, but Sainz said they didn’t offer any opinions.
“They don’t make political judgments,” he said.
Sainz said the credit raters asked really good questions, such as when the audit committee’s investigative report into alleged wrongdoing would be done; when the city’s long-delayed fiscal year 2003 audited financial statements would be completed; and what the 2007 budget was going to look like.
— ANDREW DONOHUE
The pension board is slated to meet Monday morning at 8:30 a.m. to begin charting its direction in the wake of a nearly 500-page investigative report into the history of San Diego’s pension crisis. The board has convened an ad hoc committee to address the report’s contents.
The study by Navigant Consulting recommended that the pension system: seek to recoup what could be hundreds of millions of dollars that the city shortchanged the pension system dating back to 1996; prepare for the possibility that the city goes into bankruptcy; not hire staff from the city of San Diego; and assess governance issues such as the independence of the pension system’s board and staff from the city.
Monday’s meeting will be of the full board and members will discuss the goals and responsibilities of the new committee, a spokeswoman for the pension system said.
The new ad hoc committee will hold regular public meetings, the spokeswoman said. Trustees Mark Sullivan, Thomas Hebrank and Richard Kipperman will serve on the committee.
Also at Monday’s meeting, lawyers for the two top former SDCERS staff members — who were indicted on fraud and conspiracy charges earlier this month — are scheduled to speak to the pension board. The attorneys are expected to lobby the pension board to pay their legal bills. Larry Grissom, former retirement administrator, and Lori Chapin, chief legal counsel, were indicted with three former pension trustees for their roles in the 2002 deal between the city and the pension system.
Pension officials say they ceased paying Grissom and Chapin’s legal bills once they were charged Jan. 6.
(Incidentally, “ad hoc” isn’t just an adjective. According to the Houghton Mifflin dictionary, “ad hocism” is a noun meaning “The tendency to establish temporary, chiefly improvisational policies and procedures to deal with specific problems and tasks.”)
— ANDREW DONOHUE
Missed the Point
In response to my piece contending that there is no housing shortage in San Diego, there were a few letters from correspondents who pointed out, with varying degrees of hostility, that I was mistaken: that regardless of the amount of houses out there, San Diego has a shortage of affordable housing. These folks entirely missed the point of my article.
We are constantly told by real estate analysts that the reason housing is so expensive is that San Diego has not been building enough houses in comparison to population growth — that there is, in other words, a housing shortage. The crux of my argument was that there is no data to support the claim of a structural housing shortage. I couldn’t agree more that San Diego housing is too expensive (or, put another way, insufficiently “affordable”). The entire point is this: whatever the reasons may be for the explosive rise in San Diego home prices, a housing shortage is not one of them, despite ubiquitous claims to the contrary.
Because there is clearly some confusion on this matter, I will discuss it further in next week’s column. (Editor’s Note: Rich’s columns run every Thursday in our commentary section.)
Whoever I am, I’m Guilty
The city of San Diego worker arrested last week for stealing personal information from customers of the water department pleaded guilty to two counts of identity theft Thursday and will likely be sentenced to two years in prison.
Jacqueline Lawrence, an employee in the city’s General Services Department, was accused of using customers’ social security numbers and driver’s license data to purchase hundreds of dollars worth of products online. The District Attorney’s Office said the incident was isolated, but that the investigation is ongoing.
Mayor Jerry Sanders said that all water customers would be notified of the security breach and that steps are being taken to bar city workers from accessing customer billing information if it’s not within the purview of their job.
— EVAN McLAUGHLIN
A Call Out to L.T.
Voice of San Diego received a letter today addressed to LaDanian Tomlinson from a fan named Tyler in Crystal Lake, Ill., seeking an autograph and praising the Chargers star for his running skills.
The letter reads in part: “I hope you never quit because you are amazing and fun to watch.”
We can second that.
While Voice has certainly become a prominent force in San Diego, we don’t quite have easy access to people like L.T.
But one of you might. If you can help Tyler get his letter to Tomlinson, I’m sure he’d appreciate it. Send an e-mail to firstname.lastname@example.org to help.
— SCOTT LEWIS
As walls, agents and bright lights continue to build up at the U.S./Mexico border; recent news reports show that Americans are actively involved in the smuggling of immigrants. This week, the Los Angeles Times observed a smuggling ring at work at the Tijuana/San Diego border — one that uses Americans to more inconspicuously transport immigrants through border check points. His piece immediately generated reaction from officials, including county Supervisor Dianne Jacob.
The folks over at San Diego Magazine did an intriguing piece on American smugglers last April, spending time with some ex-pats and ex-cons living in a trailer park in Rosarito.
— VOICE STAFF
Transcript Editor Bolts
Reo Carr, the editor-in-chief of the San Diego Daily Transcript has resigned and accepted a position with the San Diego Business Journal. He left the Transcript’s office immediately after giving word of his decision.
— SCOTT LEWIS
Earlier today in this space, we reported that Mayor Jerry Sanders introduced the condo conversion ordinance passed yesterday by City Council (see the This Just In entry below). We were given the information in a press release from the Sanders administration. However, after posting the entry, we immediately received calls from other parties at City Hall disputing this assertion.
It turns out that Sanders did introduce the ordinance — technically.
The proposal passed by council had been around long before Sanders took office. It was, however, passed through from the Development Services Department along to Council President Scott Peters. Development services is now under the mayor’s control in the new strong-mayor form of government, which took hold Jan. 3.
The first passage in press release offered by the Sanders’ administration boasts that the ordinance protects consumers. The release, describing the ordinance, leads with: “Legislative History: Introduced by the Mayor.”
— ANDREW DONOHUE
Las Vegas Loses Luster
An article in this week’s Time Magazine highlights the fact that the Las Vegas luxury condo market has started to noticeably cool.
“Buyers, mostly interested in flipping them for quick profits, eagerly anted up five-figure down payments, while developers planned more than 70 luxury towers holding a total of about 43,000 units on or near the Strip and downtown,” reads the story.
Right now, there are 52 residential condo units in construction in downtown San Diego, and the region’s experts have cautioned that the downtown condo market could be in for trouble.
An earlier This Just In item outlined an upward trend in inventory figures for downtown condos, coupled with a sinking median price for sold condos.
— WILL CARLESS
Movin’ on Up
Mayor Jerry Sanders announced his support today for an ordinance passed by the City Council yesterday that mandates specific upgrades in condo conversions.
The specific upgrades include window replacement, landscaping, electrical and plumbing enhancements and the instillation of a wired, interconnected smoke alarm system.
The ordinance would also require that an impartial professional complete an evaluation of a condominium prior to purchase.
The professional would have to issue a report assessing the building compliance with health, safety and construction codes.
It also requires that project developers replace integral building components, such as roofing, if it has a useful life of less than five years.
Sanders introduced the ordinance and it was passed yesterday by the City Council on its first reading. Under the strong-mayor system, Sanders must sign the legislation after the council does a second read in two weeks.
— SAM HODGSON
Chalk the Vote
A City Council panel decided to not ask voters to change certain city laws in the June election, but left open the possibility that San Diegans would be asked in November whether they’d like to strengthen lobbying disclosure laws or determine how the auditor is hired and fired.
The Rules Committee discussed on Wednesday a number of questions the city attorney and a member of the public want placed before the city’s voters in an upcoming election. The committee ultimately decided that it would be better to wait until after the June primaries to plan what charter-changing propositions San Diegans should consider.
Only voters can make changes to the City Charter, which serves as a constitution for city matters, while the council can amend ordinances in the municipal code with a simple majority vote.
Hillcrest resident Mel Shapiro asked the panel to consider two propositions: removing the city’s in-house auditor from the purview of the mayor and requiring council members to state whether they had been lobbied on legislation they would be voting on.
Shapiro and several council members said that the new strong-mayor structure at City Hall has limited the Auditor’s Office’s independence. Separating the auditing function from the mayor is a needed check on the city’s internal controls, they said.
“It doesn’t look good having the auditor report to the chief financial officer,” said Councilman Jim Madaffer. “Just because the county does it doesn’t make it right.”
The council discussed making the auditor an elected position or hiring the auditor to a long-term contract that could only be voided by a unanimous or near-unanimous vote of the council. Ultimately, the council decided it was too early in the five-year trial of the strong-mayor structure to see if the auditor’s independence has been harmed by its new relationship to the mayor.
The lobbying-disclosure proposal, which Shapiro said mirrored the Coastal Commission’s requirements, was met with less enthusiasm. Some council members said there would be too many hoops for officials to jump through and that mistakes would be easy to make.
The City Attorney’s Office also wants to ask voters about questions relating to elections, such as whether they’d like to allow write-in candidates in runoff elections.
Council members said they wanted to punt on June propositions because it would be 25 percent less expensive for voters to consider these questions in the November election. Some also noted that there seems to be a “voter burnout” after the city’s seemingly-endless election season. Some San Diegans have cast ballots five times in the past two years.
— EVAN McLAUGHLIN
Downtown Condo Inventory
The number of condos for sale in downtown San Diego has hit a record high, according to figures compiled by Lew Breeze, a downtown Realtor who has been tracking inventory numbers in the 92101 ZIP code since 2003.
There are currently 530 downtown condos listed on the Multiple Listing Service. That’s up from 269 during this week last year and up from 76 during this week in 2004. In the last week of September 2005, the number of condos listed peaked at 529, but today’s figures are a new record for the last four years.
The number of downtown condos on the market has been rising since late December 2005. This month has seen nearly 100 new condos come onto the market in downtown.
Concurrent to the spike in inventory, prices for downtown condos have been sinking since late last year. The median price of a condo has dropped from $674,450 in the second week of December 2005 to $639,550 this week.
Breeze, who lists his statistics on his Web site www.sandiegodowntown.info, collates the price and inventory information weekly. Every week, Breeze pores through the Multiple Listing Service and selects all of the condos that are listed in the 92101 ZIP code.
IRS: A New City Probe
With the two-year-old investigations into city finances by the Securities and Exchange Commission and Justice Department becoming old news, a new federal regulator has stepped into the fray: the Internal Revenue Service.
Agents with the IRS’ tax-exempt bond branch have filed document requests with the city of San Diego related to the sale of $15.3 million in bonds in 2003, according to documents released this morning by the office of Mayor Jerry Sanders. The proceeds from the bonds, released by the city and the Metropolitan Transit Development Board, were used to refinance 1993 bonds issued to fund a trolley extension into Old Town.
As a governmental agency, the city is afforded tax-exempt status in its bond offerings. The nature of the IRS’ inquiry suggests they are scrutinizing the city’s compliance with the regulation of tax-exempt securities.
The city issued the 2003 bond sales because the interest rate on tax-exempt municipal bonds was at an all-time low, allowing the city to refinance its debt from a 5.33-percent interest rate to 3.88-percent interest, said Lakshmi Kommi, city financing services manager.
“It’s a standard, cost-reducing refunding bond,” Kommi said.
The city’s original issuance for the trolley bonds totaled $19.5 million in 1993; it had paid down slightly less than $4 million on the bonds in the 10 years before the 2003 refinancing. The city pays down the debt on the bonds from the general fund, its day-to-day operating budget.
The IRS has requested the final official bond statement, the federal tax certificate, a cost schedule of the issuance and a list of assets acquired with proceeds. The Mayor’s Office announced that the city will comply with the request and has filed a copy of the request with the Nationally Recognized Municipal Securities Information Repositories, a municipal bond information clearinghouse.
Read Voice’s Thursday edition for complete coverage.
— ANDREW DONOHUE
Check out the ongoing debate over the role of desperate sellers in today’s real estate market in San Diego on Voice columnist Rich Toscano’s Professor Piggington’s Web site.
The discussion board has generated dozens of responses from concerned parties and “defenders” of the real estate market from all over San Diego. Here’s a couple of samples:
1. Posted by Steve Smith on Jan. 23:
Was at a PB open house yesterday …
— 33 days on the market
Within 10 minutes of arrival and saying nothing about the high price, Realtor approached and said the owner would take $850k and suggested we just ‘make any offer’. Family circumstances was forcing the sell … Nothing like the instant $150k+ discount!
2. Posted by Poway seller on Jan. 23:
All it takes is one desperate seller per subdivision to drop the price for the entire subdivision. A Realtor at the office of Diane Kane (who was quoted in the article) told me of two listings in Poway, where the seller took about 10 percent below list price, and now the comps are down for the entire very large neighborhood. These are tract home subdivisions, where each home is the same.
Read the article on Voice of San Diego, then log on to www.Piggington.com to share your own comments.
— WILL CARLESS
E-mail? What E-mail?
While the city of San Diego continues to deal with the reverberations of making public thousands of internal e-mails related to its pension crisis, the county of San Diego has developed a convenient way to avoid a similar situation.
It deletes its e-mails, apparently.
In response to a public records request several weeks ago from the Voice of San Diego for records from 2002, a lawyer in the County Counsel’s Office said the county does not archive e-mails for longer than 90 days.
“We have no legal obligation to do so,” said Chief Deputy County Counsel Valerie Tehan. “The only way we would have emails from back then is if somebody printed them out and decided to save them in their records.”
— SCOTT LEWIS
A press release put out this afternoon by Gregory J. Smith, the assessor, recorder and clerk for the county of San Diego, warns homeowners about out-of-state companies that have been offering copies of property deeds for a $55 fee.
Property deeds can be downloaded from the assessor’s Web site, www.sdarcc.com for $2 a page plus a $1 fee for certification. The press release says that in most cases, homeowners will pay “substantially less” for ordering their deeds themselves through the county’s site.
“Ordering online is a quick, convenient, secure way to obtain copies of your recorded document,” the press release quotes Smith as saying.
Property owners are also advised that they can obtain the deeds by going to their local branch of the assessor’s office. A list of the offices is available on the Web site.
— WILL CARLESS
Staff at the San Diego City Employees’ Retirement System received average pay increases of 8 percent per calendar year from 1995 through 2004, according to a recent investigative report into the pension system. The increase is nearly double the 4 percent-to-4.5 percent figure assumed for most municipal employees.
For example: In December 2001 city and retirement officials began to learn of the deteriorating health of the pension system and that the fund could possibly hit a point that would have forced the city to make what was thought to be a $75 million lump-sum payment.
In that same month, a number of pension employees received pay increases, according to payroll records obtained by the Voice of San Diego. Larry Grissom, the retirement system’s former administrator who was indicted this month on federal fraud and conspiracy charges, received a pay boost of 15.9 percent. The increase lifted his biweekly salary from $5,552.08 to $6,435.36, according to the payroll figures.
SDCERS administrative costs are taken directly from the pension fund, said a spokeswoman to the pension fund. The fund now has a deficit that’s expected to approach $2 billion when new figures are released later this year.
Lori Chapin, SDCERS chief legal counsel, received a pay increase of 10.25 percent in December 2001. The raise increased her biweekly pay from $5,099.20 to $5,621.84, according to payroll documents.
Doug McCalla, SDCERS chief investment officer, received a boost of 10.5 percent on Dec. 8, 2001, upping his biweekly salary from $4,238.00 to $4,682.96. Two weeks later, on Dec. 22, 2001, McCalla received another 5 percent pay increase handed out to all general city employees, further increasing his biweekly salary to $4,917.12.
The pension board was responsible for setting Grissom’s pay, while Grissom was responsible for setting the pay of top staff, according to the report. In an interview earlier this year, Grissom said the pay increases were awarded based on job performance.
— ANDREW DONOHUE
Carlsbad’s McClellan-Palomar Airport has reopened following this morning’s crash of a private jet plane, according to authorities.
The airport is only open for takeoffs and landings, not for practice flights. Travelers can call the airport’s general information line at (760) 431-4646 for updated information.
— VOICE STAFF
What About SDCERS?
The legal argument being used in April Boling’s lawsuit against the county’ retirement system does not apply to the San Diego City Employees’ Retirement System because it only applies to pension plans that serve county employees.
However, like Boling’s concern about the county, the city may not be paying off the actual deficit under the current amortization schedule used by SDCERS.
Boling’s attorney in the suit, Michael Conger, also represented city retiree Jim Gleason when he settled with the city and SDCERS to change the way in which it funded the pension system. Terms of the settlement included spreading the pension debt over 29 years and forcing the city to pay annually what the pension system’s actuary recommended. The current fiscal year is the first to subject the city to the terms of the Gleason settlement, and the council approved making a $163 million payment into the system during last spring’s budget hearings.
Conger said it is too early to see whether the city’s payment this year will pay down any of the debt or if it will only pay off the interest. If pension forecasters find that the city’s payroll growth is below 1.3 percent for the current year, the city would have been able to pay down some of its pension deficit, he said.
SDCERS is estimated to have a shortfall of almost $2 billion.
The county’s payroll growth, Conger said, was well beyond the 1.3 percent threshold.
SDCERS will change to a 15-year amortization table in 2009, meaning the city’s pension payments will ramp up at that time.
— EVAN McLAUGHLIN
Former and current city employees who were named in two lawsuits filed by San Diego City Attorney Mike Aguirre can bill the city government for their legal costs related to those civil cases.
Superior Court Judge Linda Quinn last week ruled that the city needs to provide legal defense for those named in complaints that Aguirre filed last summer. The council voted 4-to-2 in August to provide legal fees for the employees named in the suit, one vote shy of authorizing the expenditures.
In a prepared statement released Monday, Aguirre said he will appeal the judge’s ruling.
Quinn ruled that state law requires the city to indemnify fingerprint examiner John Torres, management analyst Sharon Wilkinson, firefighters union President Ron Saathoff, former Assistant Auditor Terri Webster, former Human Resources Director Cathy Lexin and former Deputy City Manager Bruce Herring.
Aguirre filed a cross-complaint against the retirement system in July to turn the plan over to a court-appointed receiver and to challenge benefits he believes were granted illegally by the retirement system’s approval of two pension funding arrangements in 1996 and 2002. The deals, known as Manager’s Proposal 1 and Manager’s Proposal 2, allowed the city to skirt its pension bill while at the same time fattening the defendants’ future retirement checks.
A second lawsuit, which Aguirre says is based on a riskier legal theory, names eight former pension officials who the city attorney contends helped approve both MP-1 and MP-2. The other two defendants, former pension Administrator Larry Grissom and former pension legal advisor Lori Chapin, are being indemnified by the retirement system in these cases.
The city attorney said the city’s taxpayers should not pick up the tab for defendants who he believes engaged in criminal behavior. All of the defendants in Aguirre’s second lawsuit, except for Herring, face criminal charges at either the federal or state level.
The retirement system had paid for legal costs incurred by Grissom and Chapin in connection with the Justice Department’s criminal investigation into the pension system. However, retirement officials say that payment was cut off when the two were indicted Jan. 6 on fraud and conspiracy charges.
— EVAN McLAUGHLIN
Carlsbad’s McClellan-Palomar Airport is closed due to this morning’s crash of a private business jet at the airport, county officials announced.
The crash occurred around 6:40 a.m. when an incoming twin-engine Cessna 560 Citation jet skidded off the runway, hit a storage building and burst into flames. All four people onboard were killed.
Authorities expect the airport will reopen later today. Travelers can call the airport’s general information line at (760) 431-4646 for updated information.
— VOICE STAFF
Getting It Under Control
Monday, Jan. 23, 2006 — 10:07 p.m.
City Auditor John Torell painted a bleak picture of the city’s safeguards against fraud and inability to organize its financial data Monday, saying the city’s accountants were not trained to properly report the city’s books.
The Justice Department and Securities and Exchange Commission are investigating errors and omissions in the city’s financial statements to the public — which were prepared by the Auditor’s Office under Torell’s predecessor.
“The SEC is here and the U.S. attorney is here because we couldn’t produce financial statements in 2003 that met the standards of the accounting profession,” said Torell, who was hired to head up the Auditor’s Office last March.
Additionally, the city’s credit rating is suspended as outside auditors have not certified the city’s annual financial statements since 2002.
Torell’s presentation summarized the findings he made after investigating the city’s internal controls for the past six months.
The auditor also briefly touched on the control environment at City Hall, making a few hints to
Ensuring that the city had a system of checks and balances to prevent officials from having inappropriate sway over the numbers disclosed was one of the major reasons why the city hasn’t issued a certified audit for three years, he said.
“That’s the focus in the Kroll investigation. Nobody is certifying the numbers because they want to know what is wrong with the control environment,” he said.
Greg Levin, who managed the internal controls project, echoed concerns that the city had not put up the proper protections against misreporting the number.
“I would say my experience is similar to that of the audit committee,” Levin said. “For every stone that you turn over, you see more and more risk. This risk is very significant.”
Also during his presentation:
— Torell estimated that Mayor Jerry Sanders’ re-engineering of the city government could cut up to 10 percent of the city’s costs.
— The auditor said he has slashed his own budget by 13 percent by leaving positions on his payroll vacant, including the one for his own executive secretary.
“I take my own calls. I don’t get that many anyway,” Torell said.
— Torell said that many city workers his office interviewed for the report were reluctant to speak to him. He thought they were tight-lipped because they thought he wouldn’t like what he heard.
“That’s not healthy,” he said.
— EVAN McLAUGHLIN
A Costly Benefit
The investigative report into the city of San Diego’s pension system released Friday spreads the blame for the pension deficit around to many of the usual suspects: benefit increases, the city’s underfunding, investment losses and so on.
However, it also adds a new breakout: a specific benefit that allowed employees to purchase years of work credit and boost their pension checks accounts for 9 percent of the entire pension deficit.
The benefit — known as purchase of service credits — was introduced in 1996 and allowed workers to purchase up to five years of additional credit for 15 percent of their annual salary. It turns out that rate put the burden on the city, meaning taxpayers ended up heavily subsidizing the benefit. (The former mayor and a number of council members purchased the benefit: Check it out here. Councilwomen Donna Frye and Toni Atkins have since said they would attempt to return the benefit.)
There are three factors that are multiplied together to calculate an employee’s retirement check: highest year’s salary, a set “multiplier” that is determined depending on the employee’s class and the years of service that the employee worked. For every year that employees purchased at a discounted rate, they were given one year of service that they didn’t actually work.
The rate for the benefit was later changed.
The report records the deficit at $1.37 billion, although recently the mayor and city attorney have said it will likely grow to $2 billion when the next annual report is released.
— ANDREW DONOHUE
Rounding Out the Council
Kevin Faulconer and Ben Hueso were sworn in as councilmen Tuesday, vowing to uphold their campaign pledges to fix the city’s financial mess and restore integrity to probe-ridden City Hall.
The two councilmen replenish the City Council to full strength six months after former Councilmen Michael Zucchet and Ralph Inzunza resigned amid federal corruption convictions. The two ex-officials were found guilty by a jury for taking bribes from strip club lobbyist who wanted to repeal the city’s “no-touch” laws at strip clubs. Zucchet was later exonerated on most charges, with the remainder sent back for retrial. Inzunza has been sentenced to 21 months in prison but is free pending appeal.
Hueso used the swearing-in ceremony to tout an ethics pledge that he will ask other officials to sign.
“We, as the elected leaders of the city of San Diego, will be successful only if we attack the difficult problems facing our city in an honest way,” he said.
Faulconer said he was looking forward to enacting Mayor Jerry Sanders’ reform agenda, and that fixing the city’s financial problems would force the council to make tough-but-necessary decisions.
“We cannot waive a magic wand to solve our problems,” Faulconer said.
Both councilmen recognized that the city suffered from various problems, but laid out positive messages in their first appearances as elected officials.
“I’m an optimist or I wouldn’t be here right now,” Faulconer said.
Faulconer, who represents District 2, defeated Lorena Gonzalez in a runoff election on Jan. 10 by a 51-to-49 margin. Hueso won the District 8 election with 71 percent of the vote, besting Luis Acle, who earned 29 percent.
— EVAN McLAUGHLIN
Ameriquest’s Abuse Arrangement
Ameriquest Mortgage Co., the nation’s largest lender of sub-prime mortgages, has agreed to pay $325 million in a settlement to get rid of claims that it defrauded customers in almost every state, according to a press release issued today by New York Attorney General Elliot Spitzer’s office.
Sub-prime lending, which targets borrowers who do not have good credit, has been the subject of much debate within the lending industry. Appraisal fraud has been identified as a major problem in the frenzy of mortgage and re-mortgage transactions that has accompanied San Diego’s superheated real estate market.
Ameriquest was accused, during a two-year investigation, of pressuring appraisers for fraudulent property valuations and using cut-throat tactics to close deals. Such tactics included concealing interest rates and falsifying loan documents.
“Predatory lending results in substantial injury to our society’s most vulnerable consumers and undermines communities by stripping homeowner equity and hiking foreclosures,” Spitzer was quoted as saying in the press release. “Aggressive enforcement action by the states sends a strong message that abusive and predatory lending practices will not be tolerated.”
The multi-faceted settlement requires Ameriquest to better inform borrowers of the terms and rates of the mortgages they are entering into. It also requires the company to refrain from seeking re-financing business from borrowers within two years of the original loan.
The settlement, which takes effect on March 16, 2006, will also be watched over by an independent monitor.
One hundred and seventy-five million dollars of the $325 million will be eligible to Ameriquest borrowers who took out loans between Jan. 1, 2003 and April 1, 2003, and will be distributed through a national claims service to be set up by the company. Another $125 million more will be channeled to borrowers via each state government.
— WILL CARLESS
Lisa Irvine, the deputy city manager in charge of finance for the city of San Diego, has resigned and announced her intention to take a position in Carlsbad as the director of finance for that city.
Irvine’s last day is Feb. 3. She served for 18 years.
“I’m sad to leave all the friends I have made over the years at the city of San Diego,” Irvine said in a letter to colleagues. “I am so fortunate to have worked with some of the most talented people in the nation.”
“We wish her well,” said Fred Sainz, the spokesman for Mayor Jerry Sanders.
— SCOTT LEWIS
Fire Station in Training
Mission Valley received its first-ever fire station today, when a double wide trailer rolled into the parking lot of Qualcomm Stadium.
The trailer will house the crew of Fire Engine No. 45, who has been monitoring the valley since the New Year.
Mayor Jerry Sanders and Councilwoman Donna Frye helped usher in the new era of fire protection, offering words of praise for the new fire crew, and expressing a desire to eventually build a permanent station.
The Fire Department has been working to put a fire station in Mission Valley for almost 20 years. It has been unsuccessful in doing so in recent years, as the city is unable to float the necessary bonds to pay for construction, and the development impact fees in the area have been relatively nominal.
“The amount of developer impact fees that have been paid in (the last 20 years or so) are about $10 million, total,” Frye said. “We have increased the development impact fees even though most of the development has already occurred, but that will be a start and a help.”
The long-awaited infrastructure upgrade cuts fire crews’ response time from nine minutes to about six minutes. Since the new crew has been perusing the valley, it has responded to about 120 calls.
Having a fire station in Mission Valley also allows other fire crews in North Park and Hillcrest to focus on protecting those communities.
The trailer, which was uprooted from its previous location in Del Cerro, will not be operational for a few weeks.
— SAM HODGSON
Friday’s pension board meeting was packed with people who wanted to get their hands on the investigative report into the system’s dealings. In the middle of a lengthy presentation of the report, pension board President Peter Preovolos asked for a short pause so he could introduce the “special people” in the audience.
Quickly, he backtracked to say that everyone in the audience was special that day. Some, he explained, were just more special than others.
Preovolos introduced Councilwoman Donna Frye. He then moved on to a table that featured two aides to other City Council members and introduced them. He then came upon a young man who undoubtedly looked important — special, even. He asked or this young man in the blue shirt and yellow tie to stand and introduce himself to the large, curious crowd.
“I’m nobody,” the young man said.
However, loyal readers to the Voice would have known better. It was staff writer Evan McLaughlin.
— VOICE STAFF